Search Results

In the final article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, discusses the importance of keeping a long-term mindset and valuation discipline as the strategy celebrates its 30th anniversary this year.

In the past 12 months, global investors have worried about a “regime change” in the long-term inflation outlook, as well as the heavy rotation away from technology companies after the Covid optimism reversed.

One of the true competitive advantages we believe we have at FSSA is a genuine long-term investment horizon. For us, investing is not about trying to predict which stocks will rise or fall next month or quarter; rather, it is a non-speculative activity aimed at participating in the long-term value creation we believe the best companies can generate.

In our team, mistakes are teachable moments to be shared and learnt from. Thankfully, for us and our clients, in our history of investing in India we have managed to avoid the big ones.

FSSA Investment Managers has been investing in Asia and global emerging markets for three decades. We are conservative investors, and resilience during market sell-offs has underpinned our long-term performance.

While the pandemic is still far from over, a number of key leading indicators point to a healthy and broad-based recovery in China.

What are your thoughts on the increasing regulation risk of investing in China? Firstly, regulations are nothing new — it has always been a part of the investment equation.

Over the past few years, global emerging market (GEM) investors have dealt with a series of challenges, including a surging pandemic, local lockdowns and widespread travel restrictions. Now, an escalating conflict between Russia and Ukraine has raised fears that this could spill over into Europe and beyond.

With over 20 years managing money in China I have seen significant changes both in the corporate and investment environment. One of the biggest shifts that has occurred is the fact that China is not short of investment capital.

FSSA India webcast focus on the India Subcontinent Markets and Asia Pacific equities

That would perhaps be an accurate description of what drove some of my portfolio decisions as a young fund manager, roughly 15 years ago during the global financial crisis (GFC) meltdown.

After a recent meeting in Mumbai with the top management of Mahindra & Mahindra we came back with a clear message – M&M’s commitment to its purpose does not mean that it will continue to operate loss-making businesses.

Land, Labour, Capital and Entrepreneurship. These are the well-known “Factors of Production” as defined by classical economists. The Entrepreneur (or Company) is the one that combines these factors to earn a profit.

In our last client update in February 2021, we discussed the reasons we resisted the temptation to switch into pure cyclicals and so-called “value” stocks1 — even though we had anticipated a sector rotation in the market (the TOPIX subsequently peaked in March 2021).

The performance of the FSSA Japan Equity strategy has been under pressure year to date, driven by a violent style and sector rotation from quality growth to financials and cyclical companies.

There are fundamental differences in Japan’s economy to explain this. First, underlying consumption has stood still in the past decade or so.

In this China update for mid-2022, we discuss some recent topics of interest as highlighted by our clients.

Fund Manager Q&A

Ten years ago last month, I assumed lead management responsibilities for the FSSA Indian Subcontinent strategy. How time has flown!

How is the FSSA Asian Growth portfolio positioned in light of the challenging market environment? Firstly, we should note that we are agnostic about indexes.

Since we last wrote, roughly three months ago, investors in emerging markets have had to reconcile themselves to a stream of disappointing headlines from several key countries. We are often asked about our own views on politics and macroeconomics, and how we incorporate them into our investment process.

Lee Kuan Yew, although somewhat a polarising figure, perhaps understood state power and the human condition better than anybody. Consequently, Singapore has often been criticised as much as it has been greatly admired. Irrespectively and without question though, the country has gone from strength to strength.

Over the last few years, we have been selling many companies which have become expensive. On the other hand, there are still companies that are attractively valued with robust growth ahead.

Investment management is an industry where in the short run there is usually little relationship between process and outcome. In the long run, however, the link is very strong.

Last year, we wrote about the bubble we were witnessing in the initial public offerings (IPOs) in India. Now, we see a different type of bubble forming – in these cases, the business is often a proven one, with a strong track record and high return profiles.

Looking back (though it’s not like we didn’t already know), it is clear that we have been living in an increasingly distorted world. Financially, for the last decade, it has been about interest rates falling to (and staying at) zero in a world of general money printing.

At FSSA, we are long-term, bottom-up investors with a focus on quality. This mind-set also applies to how we engage with companies on Environmental, Social and Governance (ESG) matters.

As the saying goes, those who stand for nothing, fall for everything. And so it is that we believe there isn’t a price for every business. Most are better left alone in the interests of sleeping better at night. Staying disciplined to our process means erring on the side of caution and avoiding companies where we have lingering suspicions about the governance practices.

In the first article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, shares his reflections on the past three decades of investing in China markets as the strategy celebrates its 30th anniversary this year.

In the second article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, discusses the importance of keeping a long-term mindset and valuation discipline as the strategy celebrates its 30th anniversary this year.

In the FSSA GEM Focus strategy we own high-quality businesses which have competitive advantages such as strong brands, distribution advantages, cost leadership, or simply providing a service/product that customers cannot live without. Historically, this has given them pricing power and the ability to preserve margins despite adverse headwinds.

Sree Agarwal and Shivika Srimal, investment analysts at FSSA Investment Managers, believe there are a number of reasons to be positive on India in the long run, and shared their rationale at the FSSA Forum 2023.

In the Asian markets, investors have gone from “anything, as long as it’s China” to today’s high levels of fear and disbelief, but that is typical when markets fall significantly.

When China reopened at the end of 2022, domestic stocks had a V-shaped rebound, analysts raised their earnings forecasts, and companies prepared for a steep recovery in the economy. But the market’s optimism soon faded and turned into disappointment.

India's economic prowess has become a focal point for institutional investors eyeing long-term growth. Traditionally, investors lean towards Global Emerging Market (GEM) strategies to tap into this opportunity.

Important information on one fund range for sale in the European Union / EEA: the First Sentier Investors Global Umbrella Fund plc.

Contact the relevant offices for enquiries and further information.

China made headlines for watering down coal reduction targets during COP261, but we think the criticism is unfair.

Despite China being the first country to face the challenges of Covid, early optimism around its control over the virus seems to have waned.

Given its size and influence, China remains a key investment destination despite ongoing trade disputes and diplomatic tensions with the US and Australia. With a GDP equivalent to around 70% of the United States, many global portfolios continue to feature Chinese equities.

Once again, 2021 was a year full of surprises and challenges, with ongoing Covid disruptions and China turning from a global outperformer to underperformer.

2021 will be a year of recovery. This is not surprising given last year’s economic downturn. If vaccines are being rolled out gradually during the year, we believe the economy will recover, especially those sectors that have been hit hard like travel. Hong Kong’s travel sector declined by 99.9% last year so there really isn’t much room left to decline.

The China equity market includes a myriad of share classes, each with distinct characteristics. ‘Offshore’ Chinese equities are listed on overseas stock exchanges such as New York and Hong Kong and denominated in foreign currencies, while ‘onshore’ Chinese equities are listed on the Shanghai and Shenzhen Stock Exchanges and denominated in RMB.

Mutations, it would seem, are not unique to the virus. Starting with some housekeeping, we always end our letters seeking feedback from our regular readers.